Spike in oil prices fuels surge in volume; C1 Energy upsizes deal by 25% in just a matter of hours

By Ronda Fears

Nashville, May 25 - Oil was the story Wednesday in the PIPE market as crude prices shot up by more than $1 a barrel. While the number of deals remained somewhat slight, sources observed that volume in terms of dollar amounts was much bigger and the enthusiasm allowed Calgary based C1 Energy Ltd. to boost its deal to C$12.5 million from C$10 million within a couple of hours.

Crude oil futures climbed near the $51 mark after U.S. crude inventories fell 1.6 million barrels, the second drop in 15 weeks. The July crude contract gained $1.31 to settle at $50.98 a barrel on the New York Mercantile Exchange, after hitting $51.60 intraday. The U.S. Energy Information Administration's midweek petroleum data showed U.S. oil inventories fell while analysts anticipated another increase.

The news pressured stocks in the United States lower while Canadian stocks settled flat on the Toronto Stock Exchange, but it did not deter PIPE business.

C1 Energy, an oil and gas exploration and production company, announced a C$10 million private placement of common shares and flow-through common shares and just a few hours later upsized it by 25% to C$12.5 million.

The company will issue 4,255,320 common shares - up from the originally announced 3,404,256 - at a price of C$2.35 and 833,334 flow-through shares - up from the original 666,667 - at a price of C$3.00. The stock closed Wednesday unchanged at C$2.55.

Sprott Securities Inc. is lead underwriter of the bought deal. The banks will act as agent for the flow-through shares but will buy any not sold on a bought deal basis.

C1 Energy will use proceeds for its 2005 capital budget.

BayCorp wraps $10 million deal

Portsmouth, N.H.-based holding company BayCorp Holdings Ltd. is more of a broad based energy company, but it found success in the market, saying it closed on a $10 million multiple-draw convertible debt facility with Sloan Group Ltd.

Draws on the facility - with an interest rate of 8% - are convertible at any time between Nov. 15, 2005 and Dec. 15, 2005 into stock at a price of $14.05 per share. The stock closed unchanged Wednesday at $13.83. The facility matures on Dec. 15, 2005.

BayCorp, parent of various oil and gas, hydroelectric and power marketing companies, said it plans to use proceeds to fund continued development of natural gas and oil wells in East Texas under its project development agreement with Sonerra Resources Corp. and for other strategic and general corporate purposes.

Canaco sweetens pricing terms

Gold prices were again a bit firmer Wednesday, but Vancouver-based gold mining concern Canaco Resources Inc. said it has reduced the pricing on its planned private placement of up to C$2 million of units.

The company now plans to sell up to 5 million units at C$0.40 each instead of up to 4 million units at C$0.50. Canaco also cut the exercise price of the warrants to C$0.50 from C$0.75. Each unit includes one share and one half-share warrant.

Leede Financial Markets Inc. is the placement agent for the deal, which originally priced on March 21.

Canaco plans to use the proceeds for operations, exploration, acquisition and development of gold prospects in North and South America.

NHC places $2.5 million convertible

Technology names weren't absent from the market altogether, even though tech stocks took a dip on Wednesday, as Montreal-based NHC Communications Inc. announced the sale of $2.5 million of secured convertible debentures to a single investor.

"These debentures represent a vote of confidence in our company and are another key step in the strengthening of our capital structure", said NHC chief executive Sylvain Abitbol in a prepared statement.

"The funds will initially be used to support our operating activities over the next few months, for general corporate purposes including working capital, and for fees associated with this financing transaction. In the interim, as we have previously indicated, we are continuing to work to raise additional funds for product research and development."

NHC is a provider of automated main distribution frames and cross-connect equipment for copper-based telecommunications. The company will receive $1.5 million at closing and the remainder will be released from escrow once conditions are met, including receipt of an order for at least $5 million of equipment.

The securities will pay interest at Prime rate plus 200 basis points, will mature in two years and will convert at the lower of C$0.55 per share, the volume-weighted average stock price for the 10 trading days before conversion and the price on the day before the transaction closes. The principal will amortize monthly starting six months after closing. NHC can pay stock instead of cash if specified conditions are met.

In addition to the debentures, the investor will receive warrants for 50% of the shares to be issued on conversion. The warrants will run for five years and have a strike price of C$0.69.

Shells Seafood sells $6.9 million

For more diversification, Tampa, Fla.-based Shells Seafood Restaurants, Inc. was in the market with $6.9 million of units of series B convertible preferred stock and warrants sold via placement agent JMP Securities LLC.

The 460,000 units priced at $15.00 each. Each unit includes one share of preferred stock, convertible into 20 shares of common stock, and a warrant to buy 10 shares of common stock at a price of $1.30 per share.

As part of the sale, $1.3 million of related-party debt and $348,000 of existing convertible debentures will be exchanged for the new securities. Also, Shells said its $1.6 million revolving line of credit has been extended to May 23, 2007. It was previously set to expire on the closing of the preferred sale.

Shells, operator of neighborhood seafood restaurants, will use proceeds to pay off related-party debt and loans from debenture holders that were not converted into the new private placement, to complete the renovations of its existing restaurants, for acquisitions of new restaurants and to fund general working capital and general corporate purposes.

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